Biman in severe fund crunch

December 31, 2011

Board sits today to find way out
Biman Bangladesh Airlines’ financial crisis has turned so grave that the national flag carrier is now struggling to manage its regular expenditure while its payable to different organisations piles up by the day.
Biman owes Tk 247 crore-plus to its fuel supplier Padma Oil, more than Tk 270 crore to Civil Aviation Authority of Bangladesh (CAAB) and Tk 56 crore to National Board of Revenue (NBR) in travel taxes, Biman officials said.
In addition, its London office is in huge debts to various airports and organisations.
Officials say the situation is so bad that the authorities cannot bring one of its aircraft from Singapore after overhauling for lack of money.
With these, the Biman authorities will have to pay a three-month instalment of around Tk 60 crore each for the two new Boeing 777-300 aircraft purchased recently. The first instalment is due in January.
However, even after the purchase of the two aircraft in October and November this year, Biman’s income remains static.
“The situation remains almost the same as no new route was explored and no new service offered,” said Wahidul Alam, aviation analyst and editor of travel magazine Bangladesh Monitor.
Sources said the average load factor of the two new aircraft was 55 percent in November and 63 percent in December.
Biman incurred loss on 16 out of 18 routes it now operates. The two profit-making routes are Dhaka-Singapore and Dhaka-Jeddah, sources add.
“If the trend continues, the authorities will be forced to announce a layoff,” a top Biman official said wishing anonymity.
Muhammad Zakiul Islam, managing director and chief executive officer of Biman, admitted the current crisis and said, “We will discuss the matter in the board meeting [today] to find ways to tackle the situation.”
Faced with such shortage of fund, Biman sought Tk 2,500 crore in assistance from the government two months ago but the government did not give the money, sources said.
Biman insiders said the national flag carrier has incurred a loss of over Tk 200 crore in 2010-2011. The annual financial report from June 2010 to June 2011 will be placed at the Annual General Meeting of Biman for approval today.
Sharp rise in jet fuel price in the last one and a half years, operation of age-old fuel guzzling aircraft like DC-1030 and hike in the employees’ salary are the main reasons for the loss, Biman authorities said.
But experts differ. They say corruption, inefficient management and lack of a smart marketing plan are to blame for the loss.
“The national airlines will die down if the authorities fail to put in place a clever marketing plan and show zero tolerance for corruption,” observed Wahidul Alam.
Biman sources said the airlines suffered a loss of an estimated Tk 100 crore in three months following its decision to increase fare on national and international routes in the name of fuel surcharge in January this year. After the fare hike, Biman had lost around 50 percent of its passengers, prompting the authorities to bring down the fare again.
Last year, Biman incurred a loss of around Tk 80 crore, for which the civil aviation ministry demanded an explanation from the Biman board.
According to Bangladesh Economic Review 2010, Biman made profits of Tk 15 crore and around Tk 6 crore in 2009 and 2008 respectively.
The airline was turned into a public limited company in July 2007 and the government exempted Biman from a debt of over Tk 1,194 crore to Bangladesh Petroleum Corporation and over Tk 573 crore to the CAAB.